France Offers Tax Breaks to Boost Investment Michelin's factory at Le Mans

France Offers Tax Breaks to Boost Investment

PARIS -- Prime Minister Manuel Valls announced Wednesday a five-year, 2.5 billion euro (US$2.7 billion) program of tax breaks to encourage industrial investment and accelerate France's sluggish growth rate.

With tepid investment by companies seen as a key restraint to growth, Valls announced the exceptional tax break for industrial investments made over the next 12 months.

What Valls heralded as an "unprecedented measure" will allow companies to deduct 140% of the value of their industrial investments against their taxable benefits over five years, as well reduce their business taxes.

"To accelerate the economic recovery we need to remove all the obstacles, use all the tools, and investment is a key tool," Valls said.

After coming in at a meek 0.4%, Finance Minister Michel Sapin said "for growth to become strong and resilient we've been missing ... the investment engine."

The investment tax breaks are in addition to the 40 billion euros that the French government plans to give companies in tax breaks through 2017 with its so-called Responsibility Pact.

As the number of unemployed remains stuck near a record of just under 3.5 million, Valls criticized companies for not holding up their end of the bargain in terms of maintaining and creating jobs. 

Valls said the government would also seek to boost investment with 3.2 billion euros going to work on motorways.

The state-held investment bank is also to step up lending to companies by 2.0 billion euros.

And households will receive tax breaks for home insulation.

The state will also help local councils, which cut back dramatically on investment when the central government cut back funding, with advance tax refunds.

Local councils, which account for 70% of public investment, slashed their investment by 5.3 billion euros last year.

Officials from the prime minister's office estimated that the measures could reduce government revenue by some 500 million euros this year. 

Copyright Agence France-Presse, 2015

TAGS: Finance
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